Vijay Mallya's Force India Formula One team has been put into administration after a court hearing in London on Friday, deputy principal Bob Fernley said.
"An administrator was appointed by the court for Force India F1 this evening," he confirmed to Reuters.
The team's chief operating officer Otmar Szafnauer told reporters earlier that the team might have to enter some form of administration before it could emerge on a sounder financial footing.
Force India are in Budapest and will continue to prepare for Sunday's Hungarian Grand Prix, the last race before the August break.
A source close to the matter told Reuters that the action had been triggered by Mexican driver Sergio Perez, who was owed more than $A5.5 million as part of sponsorship deals brought to the British-based team.
Engine provider Mercedes was due some 13 million euros ($A20.5M), the same source added, with leading sponsor BWT also involved.
There was no immediate comment from the team on the details of the case.
"Within a week or at the most two, our financial future will become more clear and I believe much more secure," Szafnauer said earlier on Friday.
The Motorsport Week website suggested a 'pre-pack' agreement might have been lined up, with a sale of the business and assets negotiated before the appointment of administrators and the change of ownership following shortly after.
Sources close to the team indicated that was wide of the mark but suggested there were up to five interested parties.
There has been speculation within Formula One that Lawrence Stroll, the billionaire father of Canadian driver Lance, is willing to invest in Force India as part of a move for his son from Williams.
Stroll has not commented on the reports.
Another likely contender is Russian fertiliser billionaire Dmitry Mazepin, whose son Nikita competes in the GP3 support series and is a development driver for Force India.
Szafnauer acknowledged administration could be one of two potential ways out and "whichever route it is, I think the team will be fine. More than fine, actually".
Perez had described the situation as 'critical' on Thursday, recognising also that his own future remained uncertain.
Szafnauer used similar language on Friday.
"We are just in this critical period, which might last a week or two," he said.
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